Creating More Entrepreneurs
I am concerned about Scotland’s economic health.
Last year our economy shrank by 3.2 per cent and, long-term, its rate of growth is sluggish compared to what history shows us to be capable of. Part of the reason for this is simply that because of globalisation, manufacturing jobs have gone to countries where wages and capital are cheaper.
If we carry on like this, we risk slipping even further down the global league table.
To improve our economic output, we need more entrepreneurs. Put aside your preconceptions: entrepreneurs create wealth and encourage innovation.
They were the key to our national economic success in the past and they can be again in the future if only we as a nation do a better job of encouraging them.
But how? It is one thing to recognise that creating more entrepreneurs is the key to Scotland’s future prosperity. But it is quite another to put together a coherent plan for how it should be done.
Governments need to realise that they do not have the tools to make young people into entrepreneurs. That takes a sense of aspiration, and the ability to turn amorphous know-how into a viable business plan.
It cannot be done top-down by the exertions of a bureaucracy. It can only be done bottom-up, by the efforts of individuals working to turn their own hopes into plans, and their own plans into reality.
What the Government can do, I believe, is help to foster a national culture in which this is more likely to happen. This need not be expensive; it is often free. Here are a few ideas on how the Scottish Government might do it.
I am unlikely to be the first to point to many of them, and I will not be the last, but I believe that, taken together, they amount to a constructive set of ideas about how to convert Scotland’s culture from one which mythologises public services at the expense of enterprise, to one which puts Scotland back on the road to prosperity.
Firstly, the Government can provide more mentoring to entrepreneurs, and advertise it better. The Prince’s Scottish Youth Business Trust, with which I am proud to work, is a great example of what mentoring can achieve.
It helps young people who are unemployed or have no qualifications to get back on track and helps them find a job or start a business.
In order to get any business idea off the ground, there are certain things every prospective entrepreneur needs.
Help with accountancy, advice on tax, often a basic knowledge of how best to market the business, perhaps how to buy and set up a website, and often specific advice from others in the field who know the pitfalls.
Often these come from informal networks of friends and family, who can offer informal advice. But that entrenches a lack of opportunity. Just because you don’t have anyone to help you with these basics, it shouldn’t mean you don’t know where to start.
The government should lower tax rates for small businesses, make it much easier to submit tax returns online and subsidise basic business services such as accountancy and marketing advice for startups which are in their first year of business.
The effect would be more than the sum of its parts – cumulatively, this would send a message that if you have an idea for a business and the drive to turn it into a reality, the Scottish Government is with you every step of the way.
Ultimately, though, the levers available to the government to alter the culture of Scotland in favour of entrepreneurship are more subtle.
The positive effect of a TV programme such as Dragons’ Den has done more to advertise the inner workings of raising startup investment than any government initiative could ever dream of doing.
It has pushed the idea that entrepreneurship doesn’t just mean such multinational cigar-chompers like Donald Trump, it can also mean plucky technicians like Richard Dyson, or Scots with charm and drive like Duncan Bannatyne. Dragons’ Den was a particularly good example, as it showed the public that at its heart, entrepreneurship was about people making their ambitions into a reality.
The advantage of this will be long-term. If young people are encouraged to start a business, it does not actually matter that much how successful their first attempts are.
The experience of setting it up, drawing up a business plan, seeking that initial investment and feeling that initial rush of independence, will stand them in good stead for the future.
By doing these things, they will learn invaluable skills which will enable them to have no fear of starting up more businesses in the future. And in this way, Scotland’s culture will gradually change to embrace the benefits of entrepreneurship, the only proven way to lasting national prosperity.
Azeem Ibrahim is a Research Scholar at the Kennedy School of Government at Harvard University, Member of the Board of Directors at the Institute for Social Policy and Understanding and Chairman and CEO of Ibrahim Associates.
This article also appeared on www.business7.co.uk April 9, 2010: